Which of the following is an example of accumulated profit?

Correct answer: Dividend Equalisation Reserve

The direct answer is Option A: Dividend Equalisation Reserve. An accumulated profit is a profit earned in earlier periods and retained in the business instead of being distributed immediately. A Dividend Equalisation Reserve is created out of profit to help maintain a stable dividend, so it is a reserve and accumulated profit. On admission of a partner, such a reserve is generally distributed among the old partners in their old profit-sharing ratio. Option A is correct. Option B, Preliminary Expenses, is an expense or deferred expense and is not an accumulated profit. Option C, a Profit and Loss debit balance, represents accumulated loss, not accumulated profit; it reduces old partners’ claims. Option D, Advertisement Suspense Expenditure, is an expenditure item with a debit balance, not a profit reserve. Memory cue: a reserve made from profit is accumulated profit; an expense or debit balance is not.